Research
Publications
Does loss aversion apply to social image concerns? In a laboratory experiment, we first induce social image in a relevant domain, intelligence, through public ranking. In a second stage, subjects experience a change in rank and are offered scope for lying to improve their final, also publicly reported rank. Subjects who care about social image and experience a decline in rank lie more than those experiencing gains. Moreover, we document a discontinuity in lying behavior when moving from rank losses to gains. Our results are in line with loss aversion in social image concerns.
JEL Codes: C91; D91
Keywords: Loss aversion; Social image concerns; Lying behavior; Laboratory experiment
Working papers
Foreclosure and Tunneling with Partial Vertical Ownership (with Matthias Hunold)
R&R Journal of Economics and Management Strategy.
The latest version of this paper is available here.
We demonstrate how the incentives of firms that partially own their suppliers or customers to foreclose rivals depend on how the partial owner can extract profits from the target (tunneling). Compared to a fully vertically integrated firm, a partial owner may obtain only a share of the target’s profit but influence the target’s strategy significantly. We show that the incentives for customer and input foreclosure can be higher, equal, or even lower with partial ownership than with a vertical merger, depending on how the protection of minority shareholders and transfer price regulations affect the scope for profit extraction.
JEL Codes: G34, L22, L40
Keywords: Backward ownership; Entry deterrence; Foreclosure; Minority shareholdings; Partial ownership; Uniform pricing; Vertical integration
Self-image concerns play a crucial role in economic decision-making. I conduct a laboratory experiment and offer a theoretical framework to examine whether self-image concerns are reference-dependent and whether individuals react differently to gains and losses in self-image. I focus on intelligence, a self-image-relevant domain, and find that individuals update their beliefs about performance more strongly if they experience losses than gains in self-image. On average, individuals tend to avoid self-image-relevant feedback in case of gains and losses in self-image. However, the willingness to acquire self-image-relevant feedback increases if the difference between the posterior and the prior beliefs about performance increases.
JEL Codes: C91, D91
Keywords: Willful ignorance; Information avoidance; Self-image concerns; Motivated beliefs; Laboratory experiment
Limited Attention in Credence Goods Markets (with Chi Trieu, Alexander Rasch and Christian Waibel)
The latest version of this paper is available here.
Limited attention may amplify inefficiencies associated with information asymmetries. We study how consumers’ limited attention affects outcomes in a monopolistic credence goods market. In contrast to theory, real-world observations cast doubt on market efficiency. Our study presents theoretical arguments and experimental evidence that consumers’ limited attention regarding sellers’ costs can explain these differences. In our experiment, we vary consumer attention and find that increasing attention by explicitly showing firm profits boosts efficiency. Sellers are more likely to provide sufficient verifiable quality, and prices are significantly closer to equal-markup prices. Furthermore, we describe how social preferences interact with limited attention.
JEL Codes: C91, D82, D91
Keywords: Credence goods; Limited attention; Market inefficiency; Laboratory experiment
Work in progress
Destructive Communication (with Maximilian Andres)
The early draft of the paper is available upon request.
The pre-registration for this paper is available here.
This paper studies whether opposite opinions about an important yet payoff-irrelevant topic deteriorate trust and trustworthiness and offset the well-documented positive effect of communication. In an experimental setting, we vary the importance of the topic and the participants’ ability to communicate. When the topic is polarizing enough, communication no longer improves trust and even harms trustworthiness. Using unsupervised machine learning, we document that a substantial fraction of individuals focus their communication on being polarized leading to significant deterioration of both trust and trustworthiness.
JEL Codes: C92, D83, D91
Keywords: Trust; Trustworthiness; Communication; Out-group discrimination; Polarization; Online experiment
Suspicion and Communication (with Lisa Bruttel and Friedericke Fromme)
The pre-registration for this paper is available here.
In this paper, we study how communication shapes suspicion. The experiment uses a sender-receiver setup where senders have a low probability of having misaligned incentives with receivers. We focus on the impact of open communication on the receivers’ suspicion as measured by the size of the deviation from the senders’ recommendation before and after the communication. Overall, communication substantially reduces suspicion, but some receivers become more suspicious during the communication. We disentangle these effects using machine learning methods to analyze the chat logs.
JEL Codes: C92, D82, D83
Keywords: Cooperation; Communication; Suspicion; Lying; Laboratory experiment
You can contact me via email at petrishcheva (at) uni-potsdam (dot) de or
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